Since the American economy began its downward tumble six years ago, the strain on small businesses has been far more dramatic than in the post-9/11 recesssion -- a 40 percent job loss in 2007-2008 compared to just 10 percent in 2001. Small businesses owners have struggled in particular because of their inability to respond to the uncertainty brought on by weak sales and flagging consumer demand. The banks sneezed and small businesses caught pneumonia.
But in pockets of American business, often in our inner cities, there is a story of flourishing enterprise being written. It is a story of jobs added and revenues grown, of contracts won and community investments redoubled.
It is another chapter in American innovation and it is happening with minimal government risk, reasonable investment and entrepreneurs who just need a smart nudge to get out of neutral.
At a Federal Reserve conference in Washington this week, I presented the findings from my company's recently-completed research into the diamonds in our current economic rough. They remind us of just how little help it can take to drive economic growth, when applied strategically.
Our nonprofit firm, which for nine years has focused exclusively on helping established small employer firms grow, surveyed 374 small businesses to evaluate how they remained resilient during the economic recession. We define resilience by a business's job creation or retention compared to the business environment in which it operates. Of the businesses who participated in our study, a large majority -- 253 -- added new full-time positions or maintained their level of staffing only 121 lost positions.
We went to these companies that have been able to show demonstrable success at creating and sustaining job growth to more deeply understand how they were doing it. (In both 2010 and 2011, Interise's national network of small employers created net new jobs at a rate that was seven times that of the private sector as a whole according to U.S. Department of Labor statistics).
We learned through our research that while these resilient small businesses faced many of the same challenges as their peers -- from accessing capital to limited resources and capacity, they succeeded by planning effectively, remaining creative under pressure, assessing and adapting to their business environments.
What set the thriving companies apart was their capacity to read the business climate and adapt in systemic ways.
Rather than hunkering down and waiting for the economic horizon to brighten, they were able to continue their growth by managing with one eye on their existing growth plans and another on the changes in the business climate. The combination of a strategic plan focused on growth and managerial flexibility in times of intense business stress enabled creativity. Because these strong small businesses already had solid management teams in place overseeing daily operations, the CEOs were able give more of their attention to navigating the recession's uncertainties.
In a time when credit was tight, their strategic plans strengthened their case for financing.
Like all research, ours has prompted still more questions. We need to know more about how the local business environment and community impacts small business resilience and how and why firm resilience might improve or degrade over time. We also need to examine the relationship between small business growth and strategic hiring in building resilience. We need to identify the competencies associated with firm resilience and ascertain which can be taught and which are innate skills accessed only through hiring for them. Answering these questions will help us learn how firms can best build the management competencies they need for resilience in uncertain times.
Throughout this Great Recession, policymakers have spent considerable time, energy and rhetoric focusing on propping up big business and picking winners and losers -- usually more losers -- along the risky terrain of start-up investing.
While the economic reports of the day are only modestly improving and the impacts aren't yet being felt in many boardrooms or living rooms, there are pockets where the small employers, who are carrying the burden of our economic recovery, are thriving. In their success, we can rewrite the narrative of American economic strength and prosperity -- if we listen and learn.